Of the reduction of 20 cents per liter that was in force between April 1, 2022 until December 31 of last year, one of the star measures of the Executive to alleviate the effects of the energy crisis and the increase in inflation , Spanish citizens only benefited from about 14.
Of the remaining 6 cents, some 4.7 ended up financing the coffers of the oil companies and the remaining 1.3 to taxes. Some of these companies took advantage of the discount to raise prices (and improve their income statements), so that the decline at the pump in the end was less than what was intended to be achieved. Final moral: the oil companies appropriated nearly 20% of the subsidy amount. And consumers missed out on a good chunk of the pie that was destined for it.
"The subsidy distorts and creates unforeseen side effects," says Juan Luis Jímenez, associate professor of Economics at the University of Las Palmas de Gran Canaria, from the Canary Islands, who has carried out a soon-to-be-published study together with academics Jordi Perdiguero ( UAB) and José Manuel Cazorla Artiles and whose results have been advanced in recent days.
Beyond the savings generated at the pump, if the objective was to lower prices, these remained practically stable for gasoline while they rose for (crude) diesel, as a whole, almost six cents per liter. Regarding the impact on the CPI, the reduction in the end was minimal and lower than expected. Because, if we take the liter, the net price should have decreased by 20 cents while it only did so by 14.
Based on Jimenez's estimates (you can see them on his platform nadaesgratis.es), of the total cost of the measure, some 4,200 million euros, the companies appropriated some 723 million. If 202 million that were returned to the State (higher income via VAT) are added to this figure, consumers, although they enjoyed the benefits of the state discount, lost or were unable to take advantage of some 925 million of the subsidy.
For its part, the AOP (Association of Petroleum Operators) has always attributed the rise in fuel prices to the increase in prices in international markets, which were very volatile with the war in Ukraine.
“Through the subsidy mechanism there is no guarantee that all public money is transferred to consumers. It is an incomplete transition”, says Natalia Collado, a researcher at Esade EcPol who has studied the issue in depth. According to her evaluations, the independent service stations were the most daring when it came to making the pump more expensive during the discount period. “They sold fuel at lower prices and had more room to go up. But the planned state mechanisms that should ensure liquidity were not very efficient and they were forced to sell at a higher price”, explains Collado. "Furthermore, the demand for diesel is not very elastic, because it is the fuel used to transport goods, so consumption has remained stable despite the increase carried out at gas stations," she says.
As far as diesel is concerned, the situation was paradoxical. As Juan Luis Jímenez points out, as in 2023 prices are at similar levels to the period prior to the subsidy, these statistically "decreased thanks to the disappearance of the subsidy."
In any case, the Esade EcPol analysis group believes that in order to improve the effectiveness of the measure and limit the undesired effects, both redistributive and environmental, it would be better to implement alternative options. "This subsidy does not attack the root of the problem and, on the contrary, generates perverse incentives on demand," they recall.
One of the criticisms is that this high amount of public funds has ended up favoring those who have the most. Or, in this case, not only those who have cars, but also those who, among them, have larger vehicles that use more fuel. “Among citizens who consume fuel, spending on this item grows significantly with income. Thus, this subsidy policy benefits to a greater extent individuals and households of medium and high income”, maintains the Esade EcPol document. .
And all this without taking into account the environmental impact, caused by an increase in emissions, when energy priorities go in the opposite direction of fighting climate change. Among other proposals, policies more focused on specific groups are suggested. For example, the return of the hydrocarbon tax to professionals or direct aid to the most affected sectors.
